Why I Strive to Put 0% Down on ALL my Homes

I am a small time investor as we only have 7 houses. I am proud to say that I buy ALL houses with the intent to rent them out. Some are rented out sooner than others if we live in them first but the exit strategy for each purchase is to rent them out. As we have discussed in the exit strategy article, everyone should always have an exit strategy if they buy a home. My exit strategy is that my home will be a rental.

I also believe in having multiple baskets. Since I love real estate, as discussed in 6 ways to mitigate the risk, I break that into “baskets” by cities to help mitigate the risk. Our new goal is to maximize the TSP retirement contribution at the maximum $17,500. So this is another basket and since I am not a stock person we prefer to just use TSP.

We are young and trying to rapidly grow a portfolio and are not RICH. There is only so much money go to around. Therefore we have to pick and choose in order to come up with a strategy.

For us it comes down to diversification and loss of opportunity cost. We want our tenants to pay off our mortgages with us being able to continue to invest in new houses. So putting 5% down and having higher monthly payments is okay for us. That difference in monthly payment would have only made a $200 less house. On the other hand that downpayment bought us a whole another house! So success!!

We would rather leverage and have more house with “slightly” higher rates, than less houses.

Years ago when I was in High School or College I was on the plane with a very smart army spouse who was an accountant. She had told me that she was retiring and they were selling their paid off house to buy another house in Colorado. That is actually why they were on the plane, they were coming back from house hunting.

I remember thinking why they didn’t rent out that house and use the income from that house to pay down their new house? Now they had “2” homes for the price of one.

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Comments

Hi Elizabeth! Is there a chance that you could do an article about the decision to max out your husband’s TSP? The TSP is an interesting offer for military families, but I’m confused as to how it fits in with your plan to retire at 40/42. I guess I was under the impression that TSP payouts could not be taken until 59 1/2, like a regular retirement fund. On that note, how does your husband’s expected Navy retirement payout factor into your plans for early retirement?

I would be happy to do an article to max out my husbands TSP. The short answer is diversification is important. TSP is a low expense easy way to get into the market. It also is a great emergency fund since you can borrow at 2%. I love the Roth option and it works well for our needs of have “reserve funds” as required by the bank. That’s of course only the short answer, check back next week and I will have a long answer with all the good details!

My husbands expected Navy retirement income is not a factor in our current goals. While the income will be a nice bonus we are currently setting up our retirement plan as if it did not exist. This way we will have a buffer if the retirement plan changes or our expenses are higher than we anticipated. We are planning on it for the extra benefits such as health care.

Thanks! I look forward to the article. We have had personal Roth IRAs for a while now through Vanguard, but I know we should try to understand TSP. I’ve heard that some in-demand MOS’s are eligible for an ’employer match’ for the traditional IRA option, but I do not think that my husband is in one of those.

I like that your plan does not include ‘counting on’ the Navy retirement. I personally get nervous at the suggestion that pension-type payouts will provide sufficient stability in our years after the military. So many things, legislation, inflation, cost of living increases, etc. can change between now and then!

Hi Elizabeth! I stumbled across your blog on Pinterest (those Pinterest images in your blog pay off!). My husband and I aren’t in the military, but are doing a similar retirement/investment strategy to retire or not HAVE to work by 45. We currently have 2 rental houses with a total of 5 units. They’re purely rentals, we haven’t lived in them previously but are open to renting our single family homes after moving, but we don’t move as often as military families do.

Anyway, my question is regarding your preference to put 0% down. I get it for non-primary residences, because the tenants are paying the excessive interest amounts with no equity, but does the bank not require you to put money down? Is that because they’re purchased with VA loans and are primary residences so it’s not required? Banks have informed us that post-2008 banks require 25% down for investment properties. Thanks for your thoughts!

IF it is a pure investment we have been required to put 15-25% down. Its the personal property houses that we have been able to put 0% (VA loans ) and now 5% down conventional due to using up the VA loan entitlement.

I love my family, my country and real estate. My goal is to retire early through frugal living and real estate investment. I am making great strides and want to share the information I've learned through the process. Read More...